Tesla AI Day Starts Today. Here’s What to Watch. – Barron’s

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Former defense secretary Donald Rumsfeld said there are known knownsthings people knowknown unknownsthings people know they dont knowand unknown unknownsthings people dont realize they dont know. That pretty much sums up autonomous driving technology these days.

It isnt clear how long it will take the auto industry to deliver truly self-driving cars. Thursday evening, however, investors will get an education about whats state of the art when Tesla (ticker: TSLA) hosts its artificial intelligence day.

The event will likely be livestreamed on the companys website beginning around 8 p.m. Eastern Standard Time. The companys YouTube channel will likely be one place to watch the event. Other websites will carry the broadcast as well. The company didnt respond to a request for comment about the agenda for the event, but has said it will be available to watch.

Much of what will get talked about wont be a surprise, even if investors dont understand it all. Those are known unknowns.

Tesla should update investors about its driver assistance feature dubbed full self driving. Whats more, the company will describe the benefit of vertical integration. Tesla makes the hardwareits own computers with its own microchipsand its software. Tesla might even give a more definitive timeline for when Level 4 autonomous vehicles will be ready.

Roth Capital analyst Craig Irwin doesnt believe Level 4 technology is on the horizon though. He tells Barrons the computing power and camera resolution just isnt there yet. Tesla will work hard to suggest tech leadership in AI for automotive, says Irwin. Reality will probably be much less exciting than their claims.

Irwin rates Tesla shares Hold. His price target is just $150 a share.

The car industry essentially defines five levels of autonomous driving. Level 1 is nothing more than cruise control. Level 2 systems are available on cars today and combine features such as adaptive cruise and lane-keeping assistance, enabling the car to do a lot on its own. Drivers, however, still need to pay attention 100% of the time with Level 2 systems.

Level 3 systems would allow drivers to stop paying attention part of the time. Level 4 would let them stop paying attention most of the time. And Level 5 means the car does everything always. Level 5 autonomy isnt an easy endeavor, says Global X analyst Pedro Palandrani. There are so many unique cases for technology to tackle, like in bad weather or dirt roads. But level 4 is enough to change the world. he added. He is more optimistic than Irwin about the timing for Level 4 systems and hopes Tesla provides more timing detail at its event.

Beyond a technology run down and level 4 timing, the company might have some surprises up its sleeve for investors. Palandrani has two ideas.

For starters, Tesla might indicate its willing to sell its hardware and software to other car companies. That would give Tesla other unexpected, sources of income. Tesla already offers its full self driving as a monthly subscription to owners of its cars. Thats new for the car industry and opens up a source of recurring revenue for anyone with the requisite technology. Selling hardware and software to other car companies, however, would be new, and surprising, for investors.

Tesla might also talk about its advancements in robotics. CEO Elon Musk has talked often in the past about the difficulty of making the machine that makes the machine. Some of Teslas AI efforts might also be targeted at building, and not just driving, vehicles. Were just making a crazy amount of machinery internally, said Musk on the companys second-quarter conference call. This is.not well understood.

Those are two items that can surprise. Whether they, or other tidbits, will move the stock is something else entirely.

Tesla stock dropped about 7% over Monday and Tuesday partly because NHTSA disclosed it was looking into accidents involving Teslas driver assistance features. Tesla will surely stress the safety benefits of driver assistance features on Thursday, whether it can shake off that bit of bad news though is harder to tell.

Thursday becomes a much more important event in light of this weeks [NHTSA] probe, says Wedbush analyst Dan Ives. This week has been another tough week for Tesla [stock] and the Street needs some good news heading into this AI event.

Ives rates Tesla shares Buy and has a $1,000 price target for the stock. Teslas autonomous driving leadership is part of his bullish take on shares.

If history is any guide investors should expect volatility. Tesla stock dropped 10% the day following its battery technology event in September 2020. It took shares about seven trading days to recover, and Tesla stock gained about 86% from the battery event to year-end.

Tesla stock is down about 6% year to date, trailing behind the 18% and 15% comparable, respective gains of the S&P 500 and Dow Jones Industrial Average. Tesla stock hasnt moved much, in absolute terms, since March. Shares were in the high $600s back then. They closed down 3% at $665.71 on Tuesday, but are up 1.3% at $674.19 in premarket trading Wednesday.

Write to allen.root@dowjones.com

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Tesla AI Day Starts Today. Here's What to Watch. - Barron's